Does Groupon Kill Small Businesses?

The sad tale of Posies Cafe’s experience with Groupon, Groupon in Retrospect, shows the dangers of offering heavily discounted services to an unlimited supply of customers. While I think the majority of the fault lies with Posies not really thinking through the implications of the promotion, it also seems like Groupon’s sales rep was all too eager to walk them off the edge of the cliff.

I spoke with John, a Groupon rep, and we started formulating the idea. He didn’t have to sell me on the concept, I understood and thought it was genius. Then we talked pricing. We were going to offer a $6 for $13 (pay $6 and get $13 worth of product) because John told me people really respond to deals that are over 50% discount. It wasn’t starting off as that great of a deal for us, but we kept talking. Then we talked the percentage split. John told me that when the consumer pays less than $10, Groupon usually takes 100% of the money. What?! He reassured me that most customer buy more than the $13, and that we would never have to advertise again after taking advantage of their network.

On the plus side, check out the comments, trolls aside, and see a great example of how a SMB uses social media to engage with its customers in a positive, open fashion.

MAKE IT GO VIRAL WITH YOUR AWESOME SHARING POWERS:

8 responses so far ↓

I just reread the part about how Posie’s Cafe would never have to advertise again if they used Groupon. It’s out of context but if that were the case wouldn’t that mean that you would never have to use Groupon again?

I would have never thought that Groupon could negatively affect a business. As awesome a marketing technique as using coupons and such a large audience that Groupon has, you’d think it would work out nicely. And on top of that, I thought that you could limit the amount of coupons you could sell there, as I always see “3 remaining” or such when I’m visiting.

Who knows. I guess you gotta be smarter with your advertising that just opting in to doom. =/ Coupons are an awesome idea, but you can’t just jump in like it will make your business boom. You have to be strategic about it.